Housing and Construction Quarterly

New Zealand Housing and Construction Quarterly September 2014 Contents Housing Market 2 House Values by Region 3 Rents by Region 4 Rents by Bedroom and Region 5 Price and Rent Comparisons 6 Housing Affordability Construction 7 Construction Sector Performance 8 Residential Construction 9 Non-Residential Construction 10 Building Activity 11 Construction Costs Social Housing 12 Availability for Low-Income Households 13 Low-Income Housing Costs 14 Government Social Housing The NewZealand Housing and Construction Quarterly provides quarterly data and analysis on the housing market, construction and social housing. This publication is produced by the Ministry of Business, Innovation and Employment. The report is available at: http:// /sector-information Key Highlights Rents Greater Christchurch actual mean rents have decreased slightly from$431 per week in April 2014, to $420 per week in July 2014. However,the rental trend growth in Greater Christchurch rents is still continuing to increase (at a much slower rate). In contrast,'s rental growth is about a quarter of Christchurch's growth rate. The region with the highest rental growth in the year ending July 2014, was Manuwatu-Wanganui at 9.8%. For more detail, see pages 3 and 4. House Values 's house values are continuing their upward trend this quarter. Similarly, Christchurch, and national house value growth is consistent with recent trends. The Massey University Home Affordability report for the June 2014 quarter stated that housing affordability deteriorated, mainly due to an increase in the national median house price as well as an increase in the average mortgage interest rates. See pages 2 and 6 for more detail. Residential and Non-Residential Construction Greater Christchurch's residential and non-residential consent activity are now both on par with levels. This increase is partly due to the post-earthquake rebuild.'s consents decreased slightly this quarter. Meanwhile, additions and alterations consents are largely unchanged nationally and in, while Christchurch levels grew 4% this quarter. For more detail, refer to pages 8 and 9. New Zealand Housing and Construction Quarterly September 2014

House Values by Region Figure 3: Change in Values for the Three Months Ending July 2014 Value Change 10%+ 5%-10% 0%-5% -5%-0% -5%+ No Data Source: Property IQ Figure 1 shows that the biggest change in house values occurred in the region (10%+), while Christchurch, Selwyn and Waimakariri all experienced growth in the 5-10% range. By contrast, the Consumers Price Index (CPI ) rose 1.6% in the year between the June 2013 and June 2014 quarters. Figure 2 shows 's house values continuing their upward trend this quarter. Similarly, Christchurch, and national house value growth is consistent with recent trends. The below values are from Property IQ, estimating current market valuation of each property at any time. Figure 2: Average House Values to July 2014 $800,000 Table 1: House Values May 2014 July 2014 Christchurch to * change in trend values Average Value $479,193 7.6% $720,426 11.6% $461,176 6.6% $451,154 1.2% Source: CoreLogic NZ $700,000 $600,000 $500,000,000,000,000,000 Christchurch p2 New Zealand Housing and Construction Quarterly September 2014

Rents by Region Figure 3: Change in Rents for the Three Months Ending July 2014 Source: MBIE Figure 3 showsthe nationalrent pattern changes. Greater Christchurch rental growth has slowed. Meanwhile, Christchurch City rents have grown between 5-10% in the year to July 2014, while North Canterbury rents grew more than 10+ over the same period. In contrast, over the June year, the CPI grew by 1.6%. Figure 4 shows 's rents growing at a similar rate to the national average, and remaining well below the Christchurch and levels. Greater Christchurch mean rents have decreased slightly from$431 per week in April 2014 to $420 per week in July 2014. However, the rental trend growth in Greater Christchurch rents are still continuing to increase(but ata much slower rate). We will continue to monitor this with more data needed in order to further examine this trend. Table 2: Rent Profile July 2014 * change in trend values Average Rent $370 4.1% $456 3.6% $419 7.3% $366 1.8% Figure 4: Average Weekly Private Rents to July 2014 Source: MBIE $500 p3 New Zealand Housing and Construction Quarterly September 2014

Rents by Bedroom and Region Figure 5: Average Private Rent by Bedroom to July 2014 Source: MBIE $700 $600 $500 5+ bedrooms 4 bedrooms 3 bedrooms 2 bedrooms 1 bedroom Each of the bedroom rent categories have stabilised between the March and June 2014 quarters, increasing by 1% on average. Table 4: Average Rent by Bedrooms July 2014 1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms 5+ bedrooms * change in trend values Average Rent $261 $334 $383 $492 $580 3.6% 3.1% 3.8% 4.7% 3.7% Figure 6 looks at annual growth in rents. Canterbury had the second-highest average rental growth in New Zealand in the year to July 2014. By contrast, 's annual rental growth rate is about a quarter of Christchurch's growth rate. The region with the highest rental growth was Manuwatu-Wanganui at 9.8%, which may be due to lower numbers of bonds lodged in that regionrather than any long term trend. Figure 6: Growth in Average Rents for the Year Ending July 2014 Source: MBIE 15% 10% Canterbury Other 5% 0% -5% West Coast Northland Taranaki Otago Hawke's Bay Southland Gisborne Marlborough Bay of Plenty Waikato Nelson Tasman Canterbury Manawatu-Wanganui p4 New Zealand Housing and Construction Quarterly September 2014

Price and Rent Comparisons Figure 7: House Values vs. Private Weekly Rents: January 2004 to July 2014 Source: MBIE and CoreLogic NZ $500 $450 $350 $250 $150 Rents (LHS) $50 House Values (RHS) $750,000 $675,000 $600,000 $525,000 $450,000 $375,000,000 $225,000 $150,000 $75,000 Figure 7 depicts the relationship between house values and private weekly rents in. Both rents and house prices continue to follow their historical trends. In the year to July 2014, house values grew faster than rents, with a 12% growth for house values compared to 3% growth for rents. Figure 8 shows the equivalent graph for Christchurch house values and rents. In Christchurch, rents are growing faster than house values, a trend that has existed since late 2011. In the year to July 2014, both rents and house values grew by 7%. Figure 8: Christchurch House Values vs. Private Weekly Rents: January 2004 to July 2014 Source: MBIE and CoreLogic NZ $450 $750,000 $675,000 $350 $250 $150 $50 Rents (LHS) House Values (RHS) $600,000 $525,000 $450,000 $375,000,000 $225,000 $150,000 $75,000 p5 New Zealand Housing and Construction Quarterly September 2014

Housing Affordability Figure 9: Massey University Housing Affordability Index to June 2014 Housing is less affordable 45 Source: Massey University, trends by MBIE 40 35 30 25 20 15 10 5 Canterbury Housing is more affordable 0 Figure 9 shows the housing affordability indicators across the major regionsand nationally. The Massey University Home Affordability report for the June 2014 quarter stated that housing affordability deteriorated, mainly due to an increase in the national median house price as well as an increase in the average mortgage interest rates. Rental affordability in Canterbury is now quickly approaching 's affordability levels. Between the March and June 2014 quarters, rental affordability rates worsened across all regions by 1% on average. The start of 2012 saw an initial large deterioration in rental affordability in Christchurch, which slowed down slightly in mid-2013. Christchurch rental affordability deteriorated by 5% in the year ending June 2014. More data are needed in order to see if quarterly rates stabilise. Table 5: Housing Affordability Massey Affordability June 2014 Canterbury Rental Affordability June 2014 Canterbury * change in trend values 3-month 1.9% 2.9% 4.1% 1.6% 3-month 0.5% 0.9% 1.2% 0.2% 12-month 6.5% 8.3% 11.2% 2.4% 12-month 1.6% 2.5% 5.2% -0.7% Figure 10: Rental Affordability Index to June 2014 45 Higher values indicate lower affordability 40 Source: MBIE, MSD (MBIE calculations) 35 30 25 20 15 10 5 Canterbury 0 p6 New Zealand Housing and Construction Quarterly September 2014

Construction Sector Performance Figure 11: Change in Construc on Sector Real GDP (%) to March 2014 20% 15% 10% 5% 0% -5% -10% -15% All Industries Construction -20% Source: Statistics New Zealand, trends by MBIE Between the December 2013 and March 2014 quarters, total gross domestic product (GDP) for New Zealand grew by 1%. Construction GDP growth increased by 7% between the December 2013 and March 2014 quarters, while it grew 14% in the year ending March 2014. Construction activity has now largely recovered from its post-recession slump. Figure 12shows that construction employment figures increased slightly this quarter and are at around 2008 levels. Employment across all industries also increased slightly. Table 6: Gross Domestic Product March 2014 Quarter All Industries Construction $b $38.6 3.8% $2.2 13.6% * Change in trend values Figure 12: Change in People Employed (%) to June 2014 20% Table 7: Employment (QES) ## Quarter All Industries Construction people employed 1,429,500 3.4% 107,800 7.7% Source: Statistics New Zealand, trends by MBIE 15% 10% 5% 0% -5% -10% All Industries Construction -15% p7 New Zealand Housing and Construction Quarterly September 2014

Residential Construction Figure 13: Dwellings Consented to June 2014 4,000 3,500 3,000 2,500 Source: Statistics New Zealand, trends by MBIE 2,000 1,500 1,000 500 0 Figure 13shows Greater Christchurch's residential construction activity is now at levels. This increase has been boosted by the post-earthquake rebuild. Meanwhile, 's consent levels decreased slightly this quarter. Figure 14 shows that between the March 2014 and June 2014 quarters, the value of residential alterations and additions continued to increase in Christchurch and. Both regions increased at faster rates than national levels; meanwhile, remained steady. Figure 14: Residen al Altera ons and Addi ons ($m) to June 2014 $180 $160 $140 $120 $80 $60 $40 $20 Table 8: Residential Construction Dwellings Consented: June 2014 Alterations & Additions: June 2014 * Change in trend values Dwelling Consents 1,950 19.0% 553 18.0% 565 45.1% 118 0.8% $m $149 27.2% $67 31.4% $28 79.8% $12 16.9% Source: Statistics New Zealand, trends by MBIE p8 New Zealand Housing and Construction Quarterly September 2014

Non-Residential Construction Figure 15: New Non-Residential Consents ($m) to June 2014 $500 $450 $350 $250 $150 $50 Figure 15 shows that non-residential consents increased slightly in Christchurch and this quarter. Meanwhile, 's non-residential consents remained at low levels this quarter. Christchurch consent levels are now at levels, partly reflecting the post-earthquake rebuild activity. Care is needed when interpreting these data, as nonresidential construction data are highly volatile. The value of consents for additions and alterations to nonresidential buildings are largely unchanged nationally and in. In contrast, Christchurch levels grew 4% between the March and June 2014 quarters. Source: Statistics New Zealand; trends by MBIE Table 9: Non-Residential Construction New Consents: June 2014 $m $390 $6 Alterations & Additions: June 2014 $m $10 * change in trend values 19.3% $144 10.6% $147 62.1% -12.2% -1.0% $27 12.0% $25 7.9% Figure 16: Non-Residential Alterations and Additions ($m) to June 2014 Source: Statistics New Zealand; trends by MBIE $180 $160 $140 $120 $80 $60 $40 $20 10.4% p9 New Zealand Housing and Construction Quarterly September 2014

Building Activity Figure 17: Earthquake-Related Building Consents ($m) to June 2014 $120 Source: Statistics New Zealand $80 Residential Non-Residential $60 $40 $20 2010 2011 2012 2013 2014 Asdepicted in Figure 17, there was a spike in earthquake related residential consents at the start of 2014, with earthquake related consents increasing by 150% between June 2013 and June 2014. Figure18 shows that trend data for buildingwork for non-residential construction grew 10% between the December 2013 and March 2014 quarters, and 7% in the year to March 2014. Note that building consents are defined as "earthquakerelated" based on whether the applicant notes them as such on the consent application. Therefore, these figures should be seen as indicative. Residential construction increased in the March 2014 quarter after growing steadily over the past year, and is now slightly higher than 2007 levels. Table 10: Total Earthquake Consents June 2014 Residential Non-Residential tr5r5r Table 11: Building Work Put in Place Since Sep March 2014 $m 2010 Quarter $b $72.4 $848 Residential $2.2 31.7% $29.3 $794 Non-Residential $1.3 7.2% * Change in trend values Figure 18: Na onal Building Work Put in Place ($m) to March 2014 $2.5 Source: Statistics New Zealand $2.0 $1.5 $1.0.5 Residential Non-Residential.0 p10 New Zealand Housing and Construction Quarterly September 2014

Construction Costs Figure 19: Cost of Building a Standard House ($/m 2 ) June 2014 Source: New Zealand Building Economist $1,600 $1,400 $1,200 Christchurch $1,000 $800 $600 Figure 19shows that Christchurch construction costs are unchanged from the previous quarter,a pattern that is common for these data, where an increase is followed by one or more quarters of no growth. Christchurch still has the second-highest construction costs of the regions we monitor. This is a change from a long-established historical trend, highlighting the pressure Christchurch's construction industry is under. Table 12: Cost of a Standard House Figure 20 shows that construction hourly earnings increased slightly this quarter compared with March 2014, decreasing the gap between construction and all industries. Earnings for all industries increased by 0.5% against the 0.3% CPI growth between the March and June 2014 quarters. Table 13: Hourly Earnings June 2014 June 2014 Quarter $/m 2 Change Quarter $/hour $1,416 4.3% All Industries $28 2.5% Christchurch $1,350 11.3% Construction $26 4.2% $1,331 4.6% * change in trend values Figure 20: Hourly Earnings March 2014 $30 Source: Statistics New Zealand, trends by MBIE $25 $20 $15 $10 $5 All Industries Construction p11 New Zealand Housing and Construction Quarterly September 2014

Affordability for Low-Income Households Figure 21: LIHA for the Three Months Ending March 2014 Affordability Issues per Capita Minimal Low Moderate High Very High Source: MSD (MBIE calculations) The Low-Income Housing Affordability (LIHA) measure is created using Accommodation Supplement (AS) data. The degree of affordability issues is calculated by looking at the proportion of households spending more than 30% of their income on housing (and how much more than 30% those households are spending). Figure 21 shows that Greater Christchurch leads the country, with the highest rates of affordability issues. Christchurch City meanwhile, has fewer affordability issues than Selwyn or Waimakariri, suggesting a move away from the centre of Christchurch toward outlying areas. As of April 2014, responsibility for the social housing needs assessment transferred from the Housing New Zealand Corporation (HNZC) to MSD. Table 14 shows the latest data from MSD. It is difficult to determine why the waiting list data is higher than in previous months. There may be many inter-related causes of this change. Agencies are investigating the drivers behind the waitlist numbers. It is still too early to tell if the change is a trend or not Table 14: Social Housing Waiting List June 2014 Quarter A Priority B Priority Waiting List 2,936 2,040 Figure 22: Social Housing Wai ng List to June 2014 7,000 A Priority 6,000 B Priority Source: HNZC, MSD Change in data responsibility from HNZC to MSD 5,000 4,000 3,000 2,000 1,000 0 p12 New Zealand Housing and Construction Quarterly September 2014

Low-Income Housing Costs Figure 23: Synthe c Lower Quar le (SLQ) Private Rents to July 2014 Source: MBIE Figure 23 shows that Christchurch SLQ rents have grown steadily since the start of 2013, but have begun to stabilise since the March 2014 quarter. CPI rose 1.6% between March 2013 and June 2014. Like the average rents, Christchurch SLQ rent levels are growing faster than any other region; however, the gap between Christchurch and SLQ rent levels is larger than the gap at the average rents level. Figure 24 shows that rents for properties with five or more bedrooms appear to be growing faster than those for any other properties at the lower end of the rental spectrum. They have, however, decreased slightly between the March and June 2014 quarters. Growth in the other bedroom categories remains relatively stable. Table 15: Synthetic Lower Quartile Rent July 2014 1 bedroom 2 bedrooms 3 bedrooms 4 bedrooms 5+ bedrooms * Change in trend values SLQ Rent $254 3.5% $334 2.7% $290 10.9% $256 1.9% $183 4.0% $248 3.1% $281 3.1% $360 4.1% $385-0.1% Figure 24: SLQ Private Rents by Number of Bedrooms to July 2014 Source: MBIE $600 $500 5+ bedrooms 4 bedrooms 3 bedrooms 2 bedrooms 1 bedroom p13 New Zealand Housing and Construction Quarterly September 2014

Government Social Housing Figure 25: Central Government Housing Spending ($m) to July 2014 $180 $160 Income-Related Rent (IRRS) $140 Accommodation Supplement (AS) Source: MBIE, MSD $120 $80 $60 $40 $20 Government spending on social housing grew significantly throughout the 2008-2009 period during the recession but flattened off in 2010. AS spending appears to be trending downwards since 2010, with the June quarter following this trend. Income Related Rent (IRR) figures have increased across the past year. Note that the AS is paid out fortnightly, which means that the expenditure will vary from month to month, depending on how many payments are being made that month. Figure 26 shows that local government rents increased slightly in this quarter, as well as nationally. However, Greater Christchurch rents have stabilised this quarter. Variability for local government rents is quite high. Table 16: Social Housing Spending Table 17: Local Government Rents Monthly June 2014 $m July 2014 Average Rent IRRS $56.5 7.0% $158-7.4% AS $91.9-3.0% $195-7.1% $174 3.3% * Change in trend values Figure 26: Local Government Housing Rents to July 2014 Source: MBIE p14 New Zealand Housing and Construction Quarterly September 2014

The Modelling and Sector Trends Team The Modelling and Sector Trends team is part of the Infrastructure and Resource Markets (IRM) group of MBIE. The purpose of the team is to provide data, modelling and analysis services to support the IRM policy development in the areas of: 1 Building and Housing, 2 Energy and Resources, 3 Communications and IT Your feedback is important to us. Please let us know what you think by emailing HousingInfo@mbie.govt.nz Website The New Zealand Housing Quarterly is available in PDF format through the Ministry's Building and Housing website: http://dbh.govt.nz/nz-housing-and-construction-quarterly For more detailed rental information, please refer to the Open Data Tables: http://dbh.govt.nz/nz-housing-and-construction-quarterly-open-data Technical Notes on our definitions and calculations can be found on the above pages. Data Sources Data for this report have been sourced from: Ministry of Social Development (MSD) Housing New Zealand Corporation (HNZC) Statistics New Zealand CoreLogic NZ Massey University New Zealand Building Economist The Ministry's internal data have also been used. Next Release The next edition of the New Zealand Housing Quarterly will be released in the first week of December 2014. Interpreting Our Graphs In any line graphs with points and lines, the points represent actual data and the lines represent a smoothed trend line estimated by MBIE. Contact Us HousingInfo@mbie.govt.nz This publication is shared under a Creative Commons Attribution licence: http://creativecommons.org/licenses/by/3.0/ You may copy all or part of this publication, as long as you reference the source as the Ministry of Business, Innovation and Employment. ISSN 2350-3327 p15 New Zealand Housing and Construction Quarterly September 2014